Case Study Question 02
Economics- Understanding Economic Development
Chapter 3: Money and Credit
Read the following passage carefully and answer the following questions:
Self-help groups exist in the rural parts of India. It organizes the rural poor especially women into small groups and collects their savings. It has 15 to 20 members usually belonging to the same neighbourhood who meet and save regularly. The saving may vary from rupees 25 to rupees hundred or even more depending upon the ability of the people to save. The members can take small loans from the group itself to meet the requirements. The group charges rate of interest on these loans but it is less than the interest charged by the moneylender. After a year or two if the group is regular in savings it becomes eligible for availing loan from the bank. The loan is sanctioned in the name of the group and is meant to create self-employment opportunities for the members. For example, the loan is given to the members for releasing mortgaged land, to meet the working capital requirements, to purchase assets and housing material. The members take the decision regarding the Savings and loan activities of the group. It also decides on the nature of the loan to be granted including the purpose, amount, rate of interest and the repayment schedule. In the case of non payment of the loan by any one member is followed up seriously by the other members in the group. Due to this reason, banks are willing to lend to poor women when organized in a self-help group even though they have no Collateral as such. solves the problem of a lack of collateral. It provides timely loans for various purposes and at a reasonable interest rate, helps women to become financially self-reliant, provides a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc. SHGs help borrowers overcome the problem of lack of collateral. They can get timely loans for a variety of purposes and at a reasonable interest rate. Moreover, SHGs are the building blocks of organisation of the rural poor. Not only does it help women to become financially self-reliant, the regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc. Andhra Pradesh accounts for maximum percentage of SHGs in bank credit.
What are SHGs?
(a) They are self help groups formed by the poor rural women.
(b) formed by government
(c) Non-government organisations
(d) formed by private institutions.